Vietnam's inflation predicted to exceed 4% in 2018: NFSC

Updated at Thursday, 14 Jun 2018, 12:05

The Hanoitimes - Vietnam`s inflation rate in 2018 may potentially hit 4 - 4.1% year-on-year, assuming oil prices average US$65 per oil barrel as forecast by the World Bank, said a report by the National Financial Supervisory Commission (NFSC).

Food prices in 2018 are forecast to raise the consumer price index (CPI), a gauge of inflation, by 0.5-0.8 percentage points, however, higher-than-expected oil prices in the world market could pose a major risk to the government's effort in controlling inflation, according to NFSC.

Overall, inflation in the first five months was still under control, assessed NFSC.

Following the commission's calculation, in case the average oil prices in 2018 increase by 17 - 20% as compared with 2017, the transportation sub-index of the CPI basket would increase by 5-7% year-on-year, resulting in an inflation rate of 3.5 - 3.8% year-on-year.

However, assuming average oil prices increase by 24-25% to US$65 a barrel, inflation rate may reach 4 - 4.1% year-on-year, due to an increase of 8 - 10% of transport costs.

In its latest update to Vietnam, HSBC also expected that inflation to average 4% for 2018.

The CPI in May increased over 0.55% month-on-month, largely due to a rise in food prices, which rose 0.9% month-on-month after two consecutive months of decline and an increase of 3.86% year-on-year, its highest since 2014.

Consequently, the average CPI in the first five months increased to 3.01% year-on-year, while inflation remained stable, up 1.37% year-on-year.

The upside surprise in May is significant, as it reintroduces the risk that headline CPI will breach the central bank's 4% target sometime in the middle of the year. However, two consecutive months of downside surprises in March and April largely depressed that risk, HSBC noted.